Inflation and rising costs have made knowing the total cost of car ownership more important for consumers
By Nora Colomer
Americans in search of greater price transparency said they want the option to buy car insurance at the dealership, a recent study said.
High inflation means that consumers today are dealing with rising costs for used and new cars as well as record increases in insurance costs, which are projected to rise by as much as 9% in 2023.
Adding the so-called 'embedded insurance' into the purchase price of a car at the point of sale would allow buyers to see their total cost of ownership (including insurance) while shopping, according to Polly's Car and Insurance Buying study.
The majority of recent car buyers (72%) said they would like an opportunity to get auto insurance at the dealership and 70% said they believed the experience of purchasing a car and insurance at the same time would "make things easier and more convenient," the study said.
"Consumers are actively shopping their insurance to combat premium hikes," Jeff Mongeon, co-founder and head of carrier relations for Polly, said in a statement. "Our car and insurance buyer study shows that they want options at every step of the car buying journey and that savvy dealers with an embedded insurance partner will have the happiest customers.
High borrowing costs dampen the demand for cars
Higher interest rates have meant high borrowing costs for consumers. Buyers paid an average rate of 8.41% in January to finance a new car, up from 5.30% last year, according to Cox Automotive data. The average rate to finance a used car rose to 12.88% in January, up from 9.40% last year.
The high cost of borrowing is one of the reasons why vehicle sales were down in 2022 and why volumes aren't expected to make a meaningful rebound in 2023, according to Cox Automotive Senior Economist Charlie Chesbrough.
"There is little reason to believe retail vehicle sales will increase in any meaningful way," Chesbrough said in a statement. "With high auto loan rates in place and inflationary pressures on American consumers, vehicle affordability will continue to put downward pressure on the U.S. auto market."
Embedded insurance is one way to help car buyers with costs
Rising interest rates and the cost of gas have made knowing the total cost of ownership more important for consumers. Eighty-six percent of consumers said that the total cost of car ownership was as important when selecting a new car not just the price of the car itself.
Consumers also said they wanted choice and were open to purchasing insurance at the point of sale, either online or in-person at the dealership. Sixty-four percent of Millennials said they would be more likely to purchase insurance from a digital auto insurance platform inside the dealership.
"We are all aware of the budget constraints that our car buyers are facing today," Tara Kasica, senior vice president of sales at Polly, said in a roundtable discussion. "One of the metrics that our study came up with was that 49% of car buyers are not getting the car they really wanted because of price and their budget.
"So when you are embedding insurance in a marketplace solution in the dealership, what that does is that it opens up the budget for the car buyer and helps them get closer to the car they really want," Kasica continued.